Gonzalo Lira On The Coming Middle-Class Anarchy

True story: A retired couple I know, Brian and Ilsa, own a home in the Southwest. It’s a pretty house, right on the manicured golf course of their gated community (they’re crazy about golf).

The only problem is, they bought the house near the top of the market in 2005, and now find themselves underwater.

They’ve never missed a mortgage payment—Brian and Ilsa are the kind upright, not to say uptight 60-ish white semi-upper-middle-class couple who follow every rule, fill out every form, comply with every norm. In short, they are the backbone of America.

Even after the Global Financial Crisis had seriously hurt their retirement nest egg—and therefore their monthly income—and even fully aware that they would probably not live to see their house regain the value it has lost since they bought it, they kept up the mortgage payments. The idea of them strategically defaulting is as absurd as them sprouting wings.

When HAMP—the Home Affordable Modification Program—was unveiled, they applied, because they qualified: Every single one of the conditions applied to them, so there was no question that they would be approved—at least in theory.

Applying for HAMP was quite a struggle: Go here, go there, talk to this person, that person, et cetera, et cetera, et cetera. “It’s like they didn’t want us to qualify,” Ilsa told me, as she recounted their mind-numbing travails.

It was a months-long struggle—but finally, they were approved for HAMP: Their mortgage period was extended, and the interest rate was lowered. Even though their home was still underwater, and even though they still owed the same principal to their bank, Brian and Ilsa were very happy: Their mortgage payments had gone down by 40%. This was equivalent to about 15% of their retirement income. So of course they were happy.

However, three months later, out of the blue, they got a letter from their bank, Wells Fargo: It said that, after further review, Brian and Ilsa had in fact not qualified for HAMP. Therefore, their mortgage would go back to the old rate. Not only that, they now owed the difference for the three months when they had paid the lowered mortgage—and to add insult to injury, they were assessed a “penalty for non-payment”.

Brian and Ilsa were furious—a fury which soon turned to dour depression: They tried contacting Wells Fargo, to straighten this out. Of course, they were given the run-around once again.

They kept insisting that they qualified—they qualified! But of course, that didn’t help at all—like a football, they were punted around the inner working of the Mortgage Mess, with no answers and no accountability.

Finally, exhausted, Brian and Ilsa sat down, looked at the last letter—which had no signature, and no contact name or number—and wondered what to do.

On television, the news was talking about “robo-signatures” and “foreclosure mills”, and rank illegalities—illegalities which it seemed everyone was getting away with. To top it off, foreclosures have been suspended by the largest of the banks for 90 days—which to Brian and Ilsa meant that people who weren’t paying their mortgages got to live rent free for another quarter, while they were being squeezed out of a stimulus program that had been designed—tailor made—precisely for them.

Brian and Ilsa are salt-of-the-earth people: They put four kids through college, they always paid their taxes. The last time Brian broke the law was in 1998: An illegal U-turn on a suburban street.

“We’ve done everything right, we’ve always paid on time, and this program is supposed to help us,” said Brian. “We follow the rules—but people who bought homes they couldn’t afford get to squat in those McMansions rent free. It would have been smarter if we’d been crooks.”

Now, up to this point, this is just another sob story of the Mortgage Mess—and as sob stories go, up to this point, it’s no big deal.

But here’s where the story gets ominous—here’s where the Jaws soundtrack kicks in:

Brian and Ilsa—the nice upper-middle-class retired couple, who always follow the rules, and never ever break the law—who don’t even cheat on their golf scores—even when they’re playing alone (“Because if you cheat at golf, you’re only cheating yourself”)—have decided to give their bank the middle finger.

They have essentially said, Fuckit.

They haven’t defaulted—not yet. They’re paying the lower mortgage rate. That they’re making payments is because of Brian: He is insisting that they pay something—Ilsa is of the opinion that they should forget about paying the mortgage at all.

“We follow the rules, and look where that’s gotten us?” she says, furious and depressed. “Nowhere. They run us around, like lab rats in a cage. This HAMP business was supposed to help us. I bet the bank went along with the program for three months, so that they could tell the government that they had complied—and when the government got off their backs, they turned around and raised the mortgage back up again!”

“And charged us a penalty,” Brian chimes in. The non-payment penalty was only $84—but it might as well been $84 million, for all the outrage they feel. “A penalty for non-payment!”

Nevertheless, Brian is insisting that they continue paying the mortgage—albeit the lower monthly payment—because he’s still under the atavistic sway of his law-abiding-ness.

I’m like Wayne Gretsky: I don’t concern myself with where the puck has been—I look for where the puck is going to be.

Right now, people are having a little hissy-fit over the robo-signing scandal, and the double-booking scandal (where the same mortgage was signed over to two different bonds), and the little fights between junior tranches and senior tranches and the servicer, in the MBS mess.

But none of that shit is important.

What’s really important is Brian and Ilsa: What’s really important is that law-abiding middle-class citizens are deciding that playing by the rules is nothing but a sucker’s game.

Just like the poker player who’s been fleeced by all the other players, and gets one mean attitude once he finally wakes up to the con? I’m betting that more and more of the solid American middle-class will begin saying what Brian and Ilsa said: Fuckit.

Fuck the rules. Fuck playing the game the banksters want you to play. Fuck being the good citizen. Fuck filling out every form, fuck paying every tax. Fuck the government, fuck the banks who own them. Fuck the free-loaders, living rent-free while we pay. Fuck the legal process, a game which only works if you’ve got the money to pay for the parasite lawyers. Fuck being a chump. Fuck being a stooge. Fuck trying to do the right thing—what good does that get you? What good is coming your way?

Fuckit.

When the backbone of a country starts thinking that laws and rules are not worth following, it’s just a hop, skip and a jump to anarchy.

TV has given us the illusion that anarchy is people rioting in the streets, smashing car windows and looting every store in sight. But there’s also the polite, quiet, far deadlier anarchy of the core citizenry—the upright citizenry—throwing in the towel and deciding it’s just not worth it anymore.

If a big enough proportion of the populace—not even a majority, just a largish chunk—decides that it’s just not worth following the rules anymore, then that society’s days are numbered: Not even a police-state with an armed Marine at every corner with Shoot-to-Kill orders can stop such middle-class anarchy.

Brian and Ilsa are such anarchists—grey-haired, well-dressed, golf-loving, well-to-do, exceedingly polite anarchists: But anarchists nevertheless. They are not important, or powerful, or influential: They are average—that’s why they’re so deadly: Their numbers are millions. And they are slowly, painfully coming to the conclusion that it’s just not worth it anymore.

Once enough of these J. Crew Anarchists decide they no longer give a fuck, it’s over for America—because they are America.

Update I:

The Center for Public Integrity has a story, written by Michael Hudson this past August 6, that shines a light on the issue of perverse incentives of the HAMP program. These perverse incentives came to light because of a whistleblower, a former employee of Fannie Mae, filing a lawsuit. Fannie Mae was so keen on being perceived as a money-maker, after the Federal government bailout, that the aid programs passed by the Congress and signed by the President were turned into profit centers.

The former executive, Caroline Herron, recounts:

“It appeared that Fannie Mae officers were focused on maximizing incentive payments available to Fannie Mae under various federal programs – even if this meant wasting taxpayer money and delaying the implementation of high-priority Treasury programs,” she claims in the lawsuit.

Herron alleges that Fannie Mae officials terminated her $200-an-hour consulting work in January because she raised questions about how it was administering the federal government’s push to help homeowners avoid foreclosure, known as the Home Affordable Modification Program, or HAMP.

Herron further alleged that “trial mods” were implemented regardless of eligibility of applicants, so that Fannie Mae would be eligible for Federal government bonuses.

Ms. Herron’s testimony in fact proves Ilsa’s suspicion that there was a scam at bottom. As Mr. Hudson writes, “Herron charges that Fannie Mae continued in headlong pursuit of ‘trial mods’ even though it knew that many had little chance of becoming permanent. [. . .] Fannie preferred doing trials, Herron alleges, because it was eligible to receive incentive payments from the Treasury Department.”

So in the pursuit of these perverse incentives, people who did not qualify for HAMP were enrolled in the program. And when their “trial mods” were up after 90 days, they would be notified that they didn’t qualify—regardless of whether they in fact did qualify, as in the case of Brian and Ilsa.

All so as to be perceived as a profitable operation, worth having been bailed out. All so as to be perceived as “returning America’s money”.

As of February, 2010, of the over one million homeowners’ mortgages under HAMP auspices, 83% were “trial mods”. One would assume that those 850,000 homeowners would also be assessed an $84 penalty for non-payment.

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What is more disturbing to me is that the growing unease of the populace, makes them more receptive to the arrival on the scene of a 'strongman'. I suspect the majority, even though mightily pissed off, would rather follow someone promising them justice (unpleasant consequences to follow later), than conduct a passive revolution.

they got a letter from their bank, Wells Fargo: It said that, after further review, Brian and Ilsa had in fact not qualified for HAMP... their mortgage would go back to the old rate... they now owed the difference for the three months when they had paid the lowered mortgage—and...they were assessed a “penalty for non-payment”.

...Brian and Ilsa sat down, looked at the last letter—which had no signature, and no contact name or number—and wondered what to do.

On television, the news was talking about “robo-signatures” and “foreclosure mills”, and rank illegalities—illegalities which it seemed everyone was getting away with...

Rule #3 - Plan ahead. Just saying, "Fuck it!" is not planning ahead. There is actually a way to make all these money problems go away. Did you ever wonder why Andrew Jackson was on the $20 bill? He destroyed the central bank. Ever wonder why Abraham Lincoln was on the $5 bill? He too waged war on the banks.

Here is the answer everyone has been looking for. Change our money, get rid of the banks. Pay back the banks in their worthless currency. Try to learn the lessons taught to us from Jackson and Lincoln, BANKS ARE EVIL.

don't know about the other boards but it seems relevant to this one. the activities of the tbtf and the treserve, combined with the abuse of the mortgage securitization game (from the mortgagor and investor standpoints) seem to beg for the actions outlined in the story, especially that recommended by the wife. not paying your income tax is also seductive but the consequences are more dire and the individual's leverage less effective. not paying the mortgage however.... big bird flying across the sky throwing shadow on our eyes.

What used to be accurate on this site, was replaced by a bunch of people who defined it because they really had no clue what it meant. A douchebag is a pretentious, sugar coated prick, but with emphasis on pretentious and sugar coated. It's not an adjective for an asshole, because assholes call other people douchebags, and assholes are more often than not proud of being assholes.

The historical answer should be well known. It is said to be bad when a public institution gets involved in private economy or worth own private assets. Please read (again) all the discussions about the topic. You dont need to move back long ago; the Europeans revived the issue when they implemented their ECB.

its a sick joke that the images of Lincoln and Jackson are used to promote the brand-name fiat.

anyway, "J. Crew Anarchist". that is catchy.

...as for our "keeping up with the Jones's" couple here:

Everybody else is doing it—so why don’t we?

Is not this attitude exactly what got them into a borrowed house at the top of the market?

why did they not just pay cash for a house and not borrow anything?

...because they could not afford the 'storefront' that they were presenting to their circle of friends.

now our 'average' couple wants to blame the banks rather than themselves?

moral of the story for our children:

JUST BECAUSE EVERYONE ELSE IS BORROWING MONEY TO SHOW OFF WITH A BIG HOUSE AND A FANCY CAR DOES NOT MEAN THAT YOU SHOULD.

..."they love golf". give me a fucking break. I've been waiting my whole life to see these types of assholes get caught pretending to be bigshots. they are the symbol of a generation that has lived and voted beyond not just their own means, but the means of their children.

...and all they do is whine about how unfair it all is.

The "Greatest Generation" gave birth to the biggest spoilt brats the world has ever known. It is a pleasure watching it all crumble.

these people are not victims, they are shallow-minded borrowers and consumers with no character.

all perhaps true but not really the point of the story. the point is that when even these paragons of rectitude abandon their trust in institutions and behavior norms to "screw the system" the system might actually get screwed, at least somewhat and for a while. invest accordingly.

So what - if they went and bought an "average" house they would still be underwater because the machine Wall Street made in collusion with the govt to pump house prices. The only problem in this story is the fucking Fed and the banks that own them. EVERYONE outside the system is poorer because that is how the system was designed.

You will say it until you have to do a reverse mortgage on your paid off house to pay for a simple surgery or routine procedure; or when the gub'mint takes your IRA and 401K away from you "for your own safety".

The game is to make you feel good about being "responsible" and "prudent" while the banks and politicians are neither.

Then, one by one, they take away our savings, assets, the sweat of our brow and the blood of our children for their own avaricious lifestyles.

If what you say is true, Chopper, I would think that society at large is getting mixed messages, wouldn't you agree?

We are told to strive, to make things happen for ourselves, to stretch our wings, reach for the impossible, have confidence in our own abilities, faith in the American system/way/dream.

Then we are chastised, by people like you, for daring to "over"reach. Who draws the line, how and when?

Many people were played in this economic disaster. These loans were handed out like free money, then the price of oil was manipulated in order to make the inevitable happen: the price of everything went up, the value of everything was questionable.

You are being played even now if you truly believe what you just wrote.

Salmon Chase, Treasury Secretary who coined the slogan of the Free Soil Party: Free soil, free labor, free men, had his visage on the $10,000 bill no longer in circulation.

Woodrow Wilson, who signed the Federal Reserve Act and IRS into law, had his mug on the $100,000 gold certificate used only by banks as thanks for campaigning against the money trust to get elected and fulfilling all its dreams when elected, like current DC pols.

My business has stalled because I spend too much time here just reading and gaining different insightful viewpoints to consider ... and laughing (my keyboard needs replacing because I have spit and snorted too much coffee into it)! But, hey, I can catch the business up later by being wiser from the experience here.

Many valuable contributors have left because Fight Club is getting a little rough, but some good scrappers have also joined since then. It's the way of all things.

Like all other *presumably* super hot *presumably* women we get to dream about on the interwebs... in reality, Marla more likely resembles a morbidly obese disabled 50-something male former welder than a hot chick.

I would say that of course he is interested. Actually trying to 'manage' this nation though may be more daunting an assignment than he would dare to accept.

If he really took it on he likely understands that he would suffer the same limitations that he does now. The elite would provide him a dictate and if he strayed, he would go down Kennedy style. He knows that.

It's not sad. I'm looking forward to it, the collapse. When justice and righteousness have been relegated to illegality, the most just thing one can do is to break the law. This is the heart of what Mr. Lira is saying, I believe. What's more is the fact that the most American thing a person can do is tell 'the system' to fuck off. Our nation is based on the principal of fuck you, and only now are we collectively remembering. Fuck the Democrats and the Republicans. Fuck the banks, and their usury. Fuck the 'American empire', the NWO, and the status quo. Fuck the war on drugs. Fuck the scammers on Wall St..... Fuck it all. People here tend to make a mockery of 'Hope & Change'. Well fuck Obama, but hope and change are exactly what is needed, and the best way to get it is the big redux - collapse - revolution. Collapse of a rotten system, to make way for the new, is not sad, it is a joyous turning of the season, and I for one can't wait. Hell if I had less to lose, I'd be out there helping it along in ways I won't put into words. For now.... I'm just biding my time, and telling the system fuck you when and where I can.

Indeed, it's the spirit of your "the most American thing a person can do is tell 'the system' to fuck off" that is causing the oligarchs to perform a scorched-earth controlled demolition of the American Experiment, rather than simply walking away and turning their attention to a larger and more promising paddock of tax livestock waiting to be milked and shorn in Asia.

America was initially created by rebels who left England to do their own thing. It gained its independence from the British monarchy 140 years later because of the rebel spirit in the Founding Fathers (notwithstanding that -- or because -- the FF were slave-owning aristocrats). Another 100 years later, it prospered precisely because it accepted the rebels and dispossessed from all the nations of Europe, Asia and Latin America ... those who had the balls to pack up and move to escape tyranny (or poverty) and build their own tiny (or large) fiefdoms from the ground up. All they needed was freedom from tax slavery.

[history lesson on the oligarchs' successive failed and succussful attempts to re-capture the errant slaves deleted here for brevity]

Rebellion is concentrated in the American DNA. So that DNA concentration is to be destroyed if the oligarchs are to continue unchallenged elsewhere.